Gold World News Flash |
- Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes
- The Twinkie That Broke The Economy's Back?
- 1 OZ 999 SILVER KRUGERRAND COMMEMORATIVE COINS, SOUTH AFRICA
- The Telegraph: Silver to go up 400% in 3 years…!
- We Are Speeding Towards Economic & Social Devastation
- GoldSeek.com Radio: Richard Daughty, Peter Eliades, & Louis Navellier, and your host Chris Waltzek
- The Unadulterated Gold Standard Part II (History)
- On Surviving The Monetary Meltdown
- Jim's Mailbox
- Alasdair Macleod: Understanding Asian gold demand
- The Three "Financial Structure" Paradigms Of Modern Finance
- Global Shadow Banking System Rises To $67 Trillion, Just Shy Of 100% Of Global GDP
- Billions in bearer bonds in NY vault could be lost to hurricane water damage
- Guest Post: The Unadulterated Gold Standard Part 2
- Gold And Silver – Market Says Wait
- Guest Post: Understanding the "Exorbitant Privilege" of the U.S. Dollar
- Negative Real Interest Rates Continue To Drive The Gold Price
- The week I coined GIACO/GIABO in 2009 (video)- First use on MaxKeiser.com was November 28, 2010
- RESULTS OF ECONOMIC ENTROPY
- Silver’s Smoking Guns, Part II: Investment Paradox
- Europe's Depression, Japan's Disaster, And The World's Debt Prison
- Join GATA in January in the city with the best reputation in the world: Vancouver
- Bruce Pile: Basel III and gold
- Money is far too important to be left to the politicians
- Tuesday 20th November 7.30pm… Yes, it's open to the public
- Standby for ‘currency induced cost push inflation’ to take gold to $3,500 predicts the legendary Jim Sinclair
- THE FORCES THAT WILL PUSH SILVER OVER $100
- Understanding Asian gold demand
- The Mysteries of Finance: What Do Canadians Know that Americans Don't?
| Commodities: Crude Oil, Gold Rise on "Fiscal Cliff" Solution Hopes Posted: 19 Nov 2012 12:39 AM PST courtesy of DailyFX.com November 18, 2012 08:27 PM Commodities rose amid a recovery in risk appetite amid hopes that US officials will manage to avoid the looming “fiscal cliff”. More of the same is seen ahead. Commodities rose amid a recovery in risk appetite amid hopes that US officials will manage to avoid the looming “fiscal cliff”. More of the same is seen ahead. Talking Points [LIST] [*]Crude Oil, Copper Rise as Risk Appetite Recovers on “Fiscal Cliff” Solution Hopes [*]Gold and Silver Supported as Firming Sentiment Dents Haven Demand for US Dollar [/LIST] Commodities are on the upswing in overnight trade amid a broad-based recovery in risk appetite. The MSCI Asia Pacific regional benchmark index is up over 1 percent, pulling sentiment-anchored crude oil and copper higher while offering de-facto support to gold and silver by way of ebbing haven demand for the US Dollar. The newswires are attributing the chipper mood to a vaguely promi...
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| The Twinkie That Broke The Economy's Back? Posted: 19 Nov 2012 12:30 AM PST from The Economic Collapse Blog:
Read More @ TheEconomicCollpaseBlog.com
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| 1 OZ 999 SILVER KRUGERRAND COMMEMORATIVE COINS, SOUTH AFRICA Posted: 19 Nov 2012 12:00 AM PST [Ed. Note: Just sharing this vid because these are real beauties - and fairly rare. Adding 'em to my watch list!] from MarkAllenChannel: I visited a pawn shop and found these nine one troy ounce South African Silver Krugerrand Commemoratives. They commemorate the minting of the 1 oz 22k gold krugerrands from years 1967-1983.
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| The Telegraph: Silver to go up 400% in 3 years…! Posted: 18 Nov 2012 11:05 PM PST from GuildF40:
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| We Are Speeding Towards Economic & Social Devastation Posted: 18 Nov 2012 11:00 PM PST from KingWorldNews:
Today 40-year veteran, Robert Fitzwilson, wrote the following piece exclusively for King World News. Fitzwilson, who is founder of The Portola Group, stated, "History says that once set in motion, fiat money schemes cannot be reversed. Tragedy and collapse are the terminal destinations. Andrew Dickson White was a professor of history in the second half of the 19th century. He also convinced Ezra Cornell to create the great university which bears his name. White became the first president of Cornell. The goal was to create "an asylum for science where truth shall be taught for truth's sake". Ben Davies continues @ KingWorldNews.com
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| GoldSeek.com Radio: Richard Daughty, Peter Eliades, & Louis Navellier, and your host Chris Waltzek Posted: 18 Nov 2012 10:00 PM PST Show Highlights: Guest Interviews. Headline news & the Market Weatherman Report. Host answers phone calls and email questions. Guests: Louis Navellier, The Little Book That Makes You Rich Richard Daughty, The Mogambo Guru Report Peter Eliades, Stockmarket Cycles
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| The Unadulterated Gold Standard Part II (History) Posted: 18 Nov 2012 09:04 PM PST ... it has become obvious that without the anchor of gold, the monetary system is un-tethered, unbounded, and unhinged. Capital is being destroyed at an exponentially accelerating rate, and this can be seen by exponentially rising debt ... Read More...
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| On Surviving The Monetary Meltdown Posted: 18 Nov 2012 08:18 PM PST Via Detlev Schlichter of DetlevSchlichter.com, Let us start by looking at the economy from 10,000 feet above: After 40 years of boozing on easy money and feasting on fantastical asset price inflations, the global monetary system is approaching catharsis, its arteries clogged and instant cardiac arrest a persistent threat. Most financial assets are expensive, and many appear to be little more than securitized promises with low probability of ever delivering payment in full. Around the globe, from Japan to the US, a policy of never-ending monetary stimulus consisting of zero interest rates and recurring rounds of 'quantitative easing' has been established aimed at numbing the market's growing urge to liquidate. Via the printing press, the central banks, the lenders-of last resort, prop up banks and financial assets and simultaneously fatten the state, the borrower of last resort, which, despite excited editorials against the savage policy of 'austerity,' keeps going further into debt almost everywhere. 'Muddling through' is the name of the game today but in the end authorities will have two choices: stop printing money and allow the market to cleanse the system of its dislocations. This would involve defaults (including those of sovereigns) and some pretty nasty asset price corrections. Or, keep printing money and risk complete currency collapse. I think they should go for option one but I fear they will go for option two. In this environment, how can people protect themselves and their property? Disclaimer Before I start sharing some of my own personal thoughts on this topic with you I should repeat my usual disclaimer: I provide economic analysis and opinion, food for thought. But I do not intend to give investment advice and certainly not any specific trade ideas. I provide a worldview, and an unconventional one at that. You alone remain responsible for your actions, and whatever you do, you do it at your own risk. My three favourite assets My three favourite assets are, in no particular order, gold, gold and gold. After that, there may be silver, and after a long gap of nothing there could be – if one really stretches the imagination – certain equities or commercial real estate. Why gold? We are, in my assessment, in the endgame of this, mankind's latest and so far most ambitious, experiment with unconstrained fiat money. The present crisis is a paper money crisis. The gigantic imbalances that threaten to unravel the system momentarily are the direct consequences of years and decades of artificially cheap credit and easy money, and are simply unfathomable in a hard money system. Take away fiat money and central banks and our current problems would be inexplicable. (If you are still under the widespread but erroneous impression that the gold standard caused the Great Depression you may want to consider that the strictures of hard money were systematically disabled and the disciplinary power of a true gold standard increasingly weakened with the establishment of the Federal Reserve in 1913, and the introduction and spreading of lender-of-last resort central banking in the US financial system. In any case, we are now in the Greater Depression, and this one is entirely the responsibility of central banking and unlimited fiat money.) Whenever paper money dies, eternal money – gold and silver – stage a comeback. We have already seen a major re-monetisation of gold over the past decade, as the metal again becomes the store of value of choice for many investors. This will continue in my view, and even accelerate. Gold is money A frequent allegation against gold is that its non-monetary applications are minor and do not justify the present price, and that gold doesn't pay interest or dividends, quite the opposite, storing and insuring it incurs running expenses. Gold is an instrument with a negative cash yield. None of these objections stand up to scrutiny. They are either wrong or irrelevant. It is investment goods that are supposed to offer cash yields – interest income or dividends. But gold is not an investment good, it is a form of money. Gold is the oldest form of money still considered a monetary asset today, and the only truly global form of money (besides silver but silver is today still more of an industrial commodity than a financial one). Gold is – importantly – inelastic money. It cannot be created nor be destroyed by politicians and central bankers. It can, of course, be taxed and confiscated, and I come to that later. The main alternative to gold is therefore not bonds, equities and commercial real estate but cash, i.e. state paper money. The person who 'invests' in gold is holding money. The cash in your wallet or under your mattress does not give you a cash return either. Neither does gold. Sometimes I get asked, what if people suddenly stopped considering gold to be a monetary asset and a store of value? Would its price not drop steeply? – That is a fair point. But this applies to your paper money, too. In fact, it applies to paper money more so. Every monetary asset – whether gold, paper tickets from the state, or electronic book-entries at your bank – receives its value (exchange value or purchasing power) from the trading public, and from nobody and nothing else, not from the state, nor from any non-monetary uses of the monetary asset, if it has any at all. If the public stops treating the item in question as money, or uses it less as money or only at a discount, it looses its monetary value. That is also always the case with state paper money. It is a sign of our hopelessly statist zeitgeist that many people believe that the state 'assigns' value to its paper money and somehow supports this value. This is not the case. The truth is that the paper tickets in your wallet have purchasing power (and thus have value beyond their paper content) for one reason and one reason only: the public accepts them as a medium of exchange, the public accepts them in exchange for goods and services. The public also determines what the exact purchasing power of those banknotes is at any moment in time and at any given place. The state does not even back its paper money with anything. If you take your paper tickets to the central bank, what do you get in return? – Change. Paper monies come and go. In fact, throughout history every experiment with paper money has ended in failure, with over-issuance the predominant cause of death. Pound and dollar are the two oldest currencies around today but through most of their history they were linked to gold or silver, which restricted their issuance. Our system of hundreds of entirely unrestricted local fiat money monopolies dates back only to 1971, at least in its present form. In the 20th century alone, almost 30 hyperinflations of paper monies were recorded. By contrast, gold has been money for 2,500 years at least. Should you be more concerned about the public not taking your gold any longer, or your paper money? Gold is hard, apolitical, and global money, supported by an unparalleled history and tradition. That is the asset I want to own when our assorted finance PhDs in the central banks, the bureaucrats in the Treasuries and Ministries of Finance, and our sociopathic welfare politicians have manoeuvred the system to the edge of the abyss. Which is now. Remember, paper money is always a political tool, gold is market money and apolitical. Paper monies come and go, gold is 'eternal' (as far as we can tell presently). You have to be clear in your mind why you buy gold. At every moment in time, all your possessions – all your wealth – can be split into three categories: consumption goods, investment goods, and money. For most of your possessions the category is pretty clear: The clothes you wear and the car you drive are consumption goods; your investment funds or your equity portfolios are investments; the banknotes in your drawer are money. For some things it is not so clear: An expensive painting might be an investment but if you hang it in your living room and enjoy looking at it, it is also a long-lasting consumption good. The house you live in could be both but in most cases it is more of a long-lasting consumption good than an investment: you use it up over time, albeit slowly, and you cannot easily liquidate it. You have to live somewhere. The wealth you are not consuming in the here and now but want to maintain for the future can thus be held in the form of money or investment goods. Money gives you (usually) no return but has other advantages, namely that it allows you to maintain your purchasing power, at least if it is proper, hard money, and simultaneously retain complete flexibility. You are not committing yourself today to any investment good (or consumption good); you remain on the sidelines to wait how things turn out. But as you hold a monetary asset – a store of value and medium of exchange of (almost) universal acceptance – you can re-enter the markets quickly and easily. Somebody will always buy the gold from you in the future (which is far from certain in the case of most of your consumption and investment goods, and also in the case of that other form of money, state paper money). Why gold now? It seems that this is an opportune time to be on the sidelines, to be not engaged in the markets for equities, bonds and real estate, or to at least keep one's exposure to these markets very low, since years and decades of unprecedented money growth have inflated and gravely corrupted the prices of standard investment goods. Sadly, these prices now rely increasingly on the kindness and efforts of manipulating bureaucrats to simply sit still and avoid a painful descent. Central bankers state – openly and unashamedly – that they now consider it part of their mandate, if not the chief part of it, to keep asset prices at elevated levels and, if possible, even boost them further. Naturally, this will require ever more aggressive money printing and eternally super-low interest rates, and certainly argues against holding much paper money. Those who like to bet on the bureaucrats may claim that it makes sense to hold the very financial assets the prices of which central bankers are manipulating. As long as the central bankers are not ashamed of running the printing presses ever faster, they will simply get their way. Well, even under the rosiest of assumptions, this argument does not support investment in bonds. It could, in principle, be an argument for equities and real estate as 'real assets' of a sort but even in respect to these assets I consider it unsound, as I will explain later. Be that as it may, the beauty of gold is precisely that it allows you to remain on the sidelines and keep your powder dry. By holding gold you remove your wealth to a considerable degree from the rigged game of artificially inflated and openly manipulated financial markets. You commit internal capital flight from the fiat money system, and you simultaneously bet on the further debasement of paper money. The bet is this: The central bankers are trapped. The state, the banks, the pension funds, the insurance companies, the investment funds – they all would be in a right mess – or an even deeper mess than they already are – without cheap money from the central bank. Ergo, the policy of super-cheap money will have to continue until the bitter end. There are a few more things to say about gold but before I do this let us talk about the worst asset. Bonds – the worst asset class in my view Bonds are ideal assets for you if you suffer from a financial death wish. Let me put it like this: After 40 years of almost relentless and of late accelerating money production we have too much debt. When you buy bonds you buy debt, and there is a lot of it to go around. And it is not even cheap. In most cases, it is ridiculously expensive, in particular when considering that most of it will never get repaid. This is especially true of the sovereign bonds of major governments, which are probably among the worst 'assets' on the planet, yet are bizarrely still considered 'safe haven' assets, a ridiculous concept to begin with. What are the prospects in the long run for government bonds? Remember that most sovereign states are now credit-addicts, desperately relying on low rates and cheap credit to fund their incurable spending habits, and increasingly leaning on their central banks to provide the daily fixes. If the central banks stop printing money and thus stop funding the governments, they go broke. If the central banks keep funding the governments they will have to keep printing money, and this will certainly lead to higher inflation at some point, and that point may even be soon. As an investor you will ultimately lose money through default or through inflation, and if it is a hyperinflation there will be default at the end of the hyperinflation. For the bond investor the choice is between death by hanging and death by drowning. If that sounds overly dramatic then ask yourself in what scenario you win or even get your money back. Only if the present policies lead to a slow and steady return to self-sustaining growth that is inflation-free and allows the central banks to slowly and painlessly remove accommodation and deflate their overgrown balance sheets, and if the political class then grows up and gets sensible, departs from its free-spending ways, gets the fiscal house in order, and starts paring back the debt. Yeah, and pigs might fly! That this scenario is evidently the basis of much strategizing by professional money managers does not say much about its soundness or even remote probability. It is simply the scenario in which the financial industry comes out unscathed, with its size, reputation and income-stream intact. It is also the one scenario in which you need little money – neither paper money nor gold – but can stay fully invested in equities, bonds and real estate, as the rosy outlook of seamless crisis resolution and onwards growth forever will ultimately justify today's lofty valuations. This is the scenario the financial industry favours and has an overwhelming desire to believe in – as do all politicians, central bankers and assorted Keynesians and other interventionists. Good luck to all of them! I fear this is wishful thinking rationalized with poor economics. Every day that the markets are open the US government borrows an additional $4billion, roughly. For 5 years running the country's budget deficits were considerably in excess of $1 trillion. Britain is among the world's most highly indebted societies if you combine private and public debt, and despite all the blather in the press about 'austerity', the public sector keeps going more into debt. Japan has long been a bug in search of a windshield. Bond investors may counter that it is all about the timing. Until death arrives, you collect coupons. – Well, hardly. With yields for the bonds of major bankrupt nations now in the 1 to 2 percent range, if that much, there is, in my view, little point in sitting on a gigantic powder keg and hoping the fuse is long enough. When this one blows, the fallout will be substantial. Why are bonds not selling off? As David Stockman has pointed out, much of the US Treasury market is not owned but rented. The big primary dealers and many hedge funds hold government bonds as trading positions funded with cheap money from the Fed. That is the true reason for the Fed's new communications policy. Ben Bernanke now goes so far as to promise to keep rates and therefore the trading community's funding costs near zero, not only for the near-term, but even beyond the tenure of his own chairmanship at the Fed. The goal is to make sure that these leveraged renters of Treasury debt stay engaged and help funding the state. Then there are the big bureaucratic asset management entities that have historically always provided a reliable home for government bonds: insurance companies, pension funds, sovereign wealth funds, foreign central banks. Built-in risk-aversion and intellectual inertia are here working in support of over-valued bond markets. Here, the big investment decisions are made by committees of professional fund managers who are often in charge of obscenely large amounts of money. To beat the market and achieve superior returns is an objective located somewhere between the hugely improbable and the completely impossible. They are destined to fail, and in this position of nerve-shredding uncertainty they all cling to the same straws: 1) do what everybody else does; 2) stick to what has worked in the past; 3) stick to the industry's assumed wisdom, such as 'never fight the Fed'; 'government bonds are safe assets because the government can always pay', and so forth. The last point has no basis in theory and history, and looks increasingly like a heroic assumption today, but that is the fund manager's line and he is sticking with it. That government bonds are a safe investment can, of course, not be left a matter of simple opinion but has to be enshrined in the laws of the land, and the state's rapidly expanding finance constabulary is already working on it. Via legislation and regulation, the state is busily building itself a captive investor base for its own debt. The state regulates the banks and has long been telling them that if they want to lend their money securely they should give it to the state. Everywhere, state-imposed capital requirements for banks can best be met by buying government bonds. The advantages are obvious: Spanish banks heavily increased their exposure to 'safe' Spanish government bonds over the past year, from about 13 percent of their balance sheets to 31 percent. And what is safe for the banks is certainly safe for insurance companies, pension funds and other 'socially important' pools of saving. 'Capital controls' is such a nasty term. Much nicer to call it 'regulation', and the masses have now been sufficiently indoctrinated with the idea that the financial crisis was caused by lack of 'regulation' so that the state can now safely and calmly tighten the screws. I fear that to a large degree this is even welcome by the asset management industry. In an unstable and increasingly uncertain world, being told what to buy lifts a great responsibility of one's shoulders. Although individually many money managers complain about stifling restrictions and regulations, it is usually the case that any outsized boom industry, when faced with the end of its boom, happily embraces state involvement to avoid getting trimmed back by market forces too harshly. Rather than seeing the return of the 'bond vigilantes' who instilled fear and loathing in debtors in the 1970s and 1980s but who roamed the financial landscape of a different age, one in which grown-ups were still allowed to smoke in public, we will most likely be treated to the sad spectacle of timid money mangers being herded into officially sanctioned asset classes by the cocksure financial market police. All of the above may help explain why expensive assets may keep getting more expensive but these are, in the end, mitigating factors only that will, at the most, postpone the endgame but not change it. One popular way to rationalize investments in bonds is that they are deflation hedges. Whenever the forces of liquidation and cleansing get the upper hand, bonds do well. This may be the case in the short term but any extended period of deflationary correction must be poison for sovereign bonds in particular: tax receipts will drop, non-discretionary state spending will balloon, and credit risk will rise. The bond market's pendulum of doom will simply swing from the risk of higher inflation to the risk of default. Gold versus other 'real assets' (equities and real estate) It is often argued that equities and real estate are also good inflation hedges, and I know many people who prefer them to gold. I see the rationale but disagree with the conclusion. Gold may no longer be cheap because what I explain here has been a powerful force behind gold for a decade. But I would argue that equities and real estate are in general much more overvalued as the current financial infrastructure is designed to channel new money into financial assets and real estate but not into gold, and our financial infrastructure has been operating on these principles for decades. How many people do you know who not only own gold but bought it on loan from their bank? Now ask yourself the same question with respect to real estate. – Gold is the great 'under-owned' asset. Its share in global portfolios is miniscule. It plays hardly any role in institutional asset management. It is true that during deflationary phases when the inflationary impetus from central banks slackens a bit and the urge of the markets to liquidate comes to the fore again, gold often sells off in sympathy with equities. But I believe that any risk of a more extended period of deflationary correction poses a much bigger problem for equities, and by extension real estate, than for gold. Additionally, ask yourself how equities and real estate will fare in an inflationary crisis or a currency catastrophe. Which companies will make money, pay dividends or even survive? Which tenants, whether residential or commercial, will keep paying the rent? I am not saying that all these equities and all the real estate will become worthless – far from me to forecast a 'Mad Max'-style end of civilisation. It is indeed to be expected that certain equities and select pieces of real estate will turn out to be decent instruments for carrying wealth through the valley of tears, and for coming out at the other end with one's prosperity intact. But which ones? It strikes me that the variance of outcomes is much greater in these hugely heterogeneous, highly inflated and widely held sectors than anything that can come from holding the eternal money and homogenous commodity gold. If you consider any major economic crisis, whether inflationary or deflationary, gold beats equities and real estate in my book. (Equities and real estate are superior to bonds and paper money, however, and this is why I listed them above as potential holdings.) Additionally, there is one aspect of real estate investing that is, in my opinion, frequently overlooked or underappreciated, and that is this one: Your property is like a marriage agreement with the local taxman, as my friend Tristan Geschex keeps reminding me. The War On Wealth is intensifying, as are the fiscal problems of most states. Both go hand in hand. Real estate is low-hanging fruit for the state, and taxation on it will most certainly increase. What market value and rent-income your property will manage to sustain through the vagaries of the crisis will most probably be subjected to confiscatory taxation from a bankrupt state. The ownership of gold could potentially also be restricted or heavily taxed. This is certainly a risk. But as I said, gold is still the under-owned asset, and there is still a chance that you can find arrangements for your gold holdings that lessen the tax implications. When the winds of change alter the political landscape in your country of residence and bring the War On Wealth to a cinema near you, you may still – if you are quick and lucky – pack your things, take your gold and move somewhere else (as long as they let you), maybe even obtain a different citizenship (as long as they let you), but owning property means having nailed your wealth to the ground and having signed up for whatever the local purveyors of snake-oil (politicians) manage to sell your fellow voters. Paper money versus gold Under what scenario would paper money beat gold, i.e. would the paper-money-price of gold drop sharply? – The answer is clear, in my view: If the central banks stopped the printing press and stopped depressing interest rates artificially and fully accepted the consequences for other asset classes and the economy. If the central banks decided to defend the value of their paper money and credibly assigned a greater importance to this objective than to the now dominant ones, which are sustaining a mirage of solvency of banks and states, funding the governments, propping up asset prices, and creating short-term growth spurts. The big gold bull market of the 1970s ended harshly in 1980, when then Fed-chairman Paul Volcker stopped the printing press, let interest rates shoot up, and looked on as the economy slipped into recession. The paper dollar enjoyed a revival and the gold price tanked. My view is that this is exceedingly unlikely |
| Posted: 18 Nov 2012 08:15 PM PST Hi Jim, I've been reading your site since day one and wanted to pass on my appreciation for what you are doing. I just thought I would do you up a chart that you can use on those down days that seem to panic so many people. Each step gold takes is getting bigger Continue reading Jim's Mailbox
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| Alasdair Macleod: Understanding Asian gold demand Posted: 18 Nov 2012 08:02 PM PST 10p ET Sunday, November 18, 2012 Dear Friend of GATA and Gold: Far from being backward, as their government thinks they are, Indians are actually the most successful investors in the world for having placed their faith in gold, GoldMoney research director Alasdair Macleod writes tonight. Macleod notes that many if not most Indian gold purchases are actually monetary gold as much as jewelry. Many other Asians, Macleod concludes, are following the Indian example, as they "instinctively know that what is actually happening is that paper money is going down, and hard experience tells them it never goes up." Macleod's commentary is headlined "Understanding Asian Gold Demand" and it's posted at GoldMoney here: http://www.goldmoney.com/gold-research/alasdair-macleod/understanding-as... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT GoldMoney adds Toronto vaulting option In addition to its precious metals storage facilities in Hong Kong, Switzerland, and the United Kingdom, GoldMoney customers now can store their gold and silver in a high-security vault operated by Brink's in Toronto, Ontario, Canada. GoldMoney also has recently partnered with Rhenus Freight Logistics to offer another gold storage option in Switzerland. The Rhenus vault is in the secured zone of Zurich Airport and offers customers superb security as well as the ability to inspect their gold. Storage at the new vaults in Canada and Switzerland is available at GoldMoney's lowest fees. Customers can select their storage location when placing their buy order. GoldMoney customers can take delivery of any number of gold, silver, platinum, and palladium bars from any GoldMoney vault, as well as personally collect their bars stored in the Hong Kong, Switzerland, and U.K. vaults. It's easy to open an account, add funds, and liquidate your investment. For more information, visit: http://www.goldmoney.com/?gmrefcode=gata Join GATA here: Vancouver Resource Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy Platinum Intercepts Best Pt+Pd+Au Grades Yet Company Press Release VANCOUVER, British Columbia -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) announces more results of its 2012 drill program on the company's fully-owned Wellgreen platinum group metals, nickel, and copper project in southwestern Yukon Territory, Canada. Four surface holes and four underground holes all intercepted significant mineralized widths, ranging from 28.5 meters (WS12-201) and up to 459.5 metres (WS12-193). Highlights include WU12-540, which returned 8.9 metres of 5.36 grams per tonne platinum, palladium, and gold; 1.73 percent copper; and 1.01 percent nickel within 304.5 meters of 0.66 g/t platinum-palladium-gold, 0.20 percent copper, and 0.27 percent nickel. The surface drill program started in June and has completed 16 holes (assays pending for 12 holes) with two rigs now on site. The surface program continues to progress at a steady pace. Prophecy Chairman John Lee commented: "Wellgreen is a very large nickel, copper, and platinum group metals project with near-surface high-grade zones. High-grade intercepts will be incorporated into resource modeling and mine planning in the pre-feasibility study. We expect further positive drill results from Wellgreen shortly." Wellgreen features a low 2.59-to-1 strip ratio, is situated at an altitude of 1,300 meters, and is only 15 kilometers from the two-lane paved Alaska Highway. Those factors significantly minimize the project's indirect costs. For the complete company statement with full tabulation of the drilling results, please visit: http://prophecyplat.com/news_2012_sep11_prophecy_platinum_drill_results....
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| The Three "Financial Structure" Paradigms Of Modern Finance Posted: 18 Nov 2012 07:04 PM PST In a prior post, we discussed the implications of the global shadow banking system having risen to the unprecedented level of roughly 100% of global GDP. By now it should be quite obvious to even the most jaded optimists, that the reason why traditional leverage conduits are no longer applicable (and the only real source of bank credit creation is the Fed via the hopeless blocked up excess reserve pathway), and why credit money (and hence in a Keynesian world "growth") has to come via deposit-free, unregulated "shadow" venues, is that there are no longer enough good money good assets for conventional secured credit creation, and viable levered projected cash flows for conventional unsecured credit creation. Yet not the entire world has gone all in on this gambit, which together with the Fed's money printing, is truly the last bastion of "money' creation. In fact, as the FRB demonstrated, there are three distinct paradigms when it comes to source of credit creation or as it puts it, "financial structure": the US "massive shadow banking system" way, the German "conventional bank deposits funds loan creation" way, and the Saudi Arabian, and soon everyone else, "central planning to the max" way. In a nutshell, these are the three credit system structure extremes, with everything else currently inbetween. These can be visualized as follows:
Follows the FRB's commentary on these three financial system "paradigms"
The chart above, incidentally, explains much if not all, the tension in modern finance. On one hand, Germany and some of the other more stable financial systems in the world such as Canada, have traditionally relied on deposits (a bank liability) to fund bank assets (loans, secured mostly and to a less extent unsecured), represented in this case by the Green line (traditional banks) being so far higher than the Red line (Shadow banks). This system had a direct linearity between cause (deposit dollar) and effect (loan dollar), magnified simply by the legacy structures of fractional reserve banking. It is this chart which explains why Germany is so scared of hyperinflation: should the massive "deposit" liability tranche of its banks start to withdraw over fears of rising price, and start chasing hard assets, not only would this start an epic bank run, not only will banks be promptly undercapitalized (recall that Deutsche's Bank's Tangible Capital is in the ~2% neighborhood, meaning the bank can withstand just 2% of deposits flowing out due to an inflation risk scare or otherwise, before it has to start selling assets to keep its equity buffer in place). Ironically, it is the fact that Germany played along the rules of the conventional game that has put it in the current predicament: had Germany followed in the footsteps of many others, such as the US, and had "Other Financial Institutions" (OFIs) represent the bulk of assets, the Bundesbank and German politicians could care one bit what the ECB does to spark inflation fears. After all shadow banking is deposit free, and there is no fear of deposit outflows leading to an undercapitalized position. Sadly, that is the price to pay for preserving some semblance of a traditional banking system. Which takes us to the US (and UK and Holland) three jurisdictions, where Shadow Banks (or OFIs) represent the bulk of assets. It is here that deposit levels are largely irrelevant as the financial system has over the past 2 decades primarily used shadow liabilities as funding conduits, which in turn means that central planning authorities have far greater degrees of freedom to intervene and monetize assets in the system, to preserve overall systemic leverage. It is also this tension between non-German Europe (willing to load up with Shadow liabilities) and Germany (not quite so willing), that has defined the European crisis for the past 3 years. It also implies that going forward central bank intervention will be determined to a big extent how dominant the Banking Sector is, whether Shadow Banking liabilities are rising (non-German Europe mostly) or falling (the US), and the relative position of central banks within the financial sector). Which finally takes us to the third paradigm, that os Saudi Arabia, and China, and Russia, and Argentina, and Indonesia, and Switzerland and slowly but surely virtually every other place in the world, as the coordinated central bank cartel becomes the one and only source of money. And not just any money, but the definition of "Gresham Law" money, as creeping central planning and ubiquitous monetization, means very soon only central banks will be the source of any incremental leverage, while all "good credit" is slowly but surely driven out of the system (courtesy of perpa-ZIRP and fears of what happens when central banks finally lose control). It is this third paradigm that is the preamble to the final collapse, because just before the endgame, it will be every central bank against everyone else, and against itself, whereby the only way to get ahead is to destroy your own currency of exchange as fast as possible, at first on a relative basis, by devaluing against all other currencies in a closed loop, then on an absolute, by devaluing against hard assets (see Executive Order 6102 and PM confiscations/redenominations). It is this endspiel that the entire developed world is rapidly rushing toward. And it is this endspiel that only the hopelessly clueless central bankers and Economist PhDs that are responsible for bringing the world to the edge of collapse, are confident can be safely navigated. Everyone else is quietly tiptoeing toward the exits...
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| Global Shadow Banking System Rises To $67 Trillion, Just Shy Of 100% Of Global GDP Posted: 18 Nov 2012 05:54 PM PST Earlier today, the Financial Stability Board (FSB), one of the few transnational financial "supervisors" which is about as relevant in the grand scheme of things as the BIS, whose Basel III capitalization requirements will never be adopted for the simple reason that banks can not afford, now or ever, to delever and dispose of assets to the degree required for them to regain "stability" (nearly $4 trillion in Europe alone as we explained months ago), issued a report on Shadow Banking. The report is about 3 years late (Zero Hedge has been following this topic since 2010), and is largely meaningless, coming to the same conclusion as all other historical regulatory observations into shadow banking have done in the recent past, namely that it is too big, too unwieldy, and too risky, but that little if anything can be done about it. Specifically, the FSB finds that the size of the US shadow banking system is estimated to amount to $23 trillion (higher than our internal estimate of about $15 trillion due to the inclusion of various equity-linked products such as ETFs, which hardly fit the narrow definition of a "bank" with its three compulsory transformation vectors), is the largest in the world, followed by the Euro area with a $22 trillion shadow bank system (or 111% of total Euro GDP in 2011, down from 128% at its peak in 2007), and the UK in third, with $9 trillion. Combined total shadow banking, not to be confused with derivatives, which at least from a theoretical level can be said to offset each other (good luck with that when there is even one counterparty failure), is now $67 trillion, $6 trillion higher than previously thought, and virtually the same as global GDP of $70 trillion at the end of 2011. Of note is that while the US shadow banking system has been shrinking (something our readers are aware of, and a fact which in our opinion implies there is nearly $4 trillion more in Fed monetization still to come, as Bernanke has no choice but to offset the credit destruction within shadow conduits, which in turn are deleveraging to the tune of nearly $150 billion per quarter), that of Europe has been increasing. The result:
And while the the bulk of the shadow activity is contained within the 3 well-known jurisdictions (US, Europe, UK) whose credit creation capacity in the traditional banking system appears to have ground to a halt, especially in Europe where unencumbered collateral is virtually nil (thus forcing credit creation in the deposit-free, unregulated shadow space), the FSB also found previously unexplored shadow banks in some brand news venus including Switzerland, China and Hong Kong:
Not unexpectedly, the FSB focuses mostly on Europe, and provides the following color:
The summary is by now well-known to most who realize that the primary driver of marginal credit money creation (in Europe) and destruction (in the US) is none other than the world's shadow banking system. As per Bloomberg:
Sadly, shadow banking, like every other unsustainable aspect of the foundering "modern" financial system, will not be fixed, resolved, or in way improved or made sustainable until the entire system crashes. What is notable, is that for the first time, the issue that is the lynchpin of virtually infinite shadow banking asset "creation" courtesy of rehypothecation, a topic that came to prominence with the MF Global collapse, and which allows infinite ownership chains on the same asset to be created as long as the counterparties are solvent, to fall under the spotlight, especially the legal loophole to create infinite rehypothecation chains with zero haircuts in the UK (hence geographic arbitrage as noted below). To wit:
That the FSB has no idea how to regulate infinite rehypothecation should come as no surprise to anyone. After all, enforcing limits on creating "assets" out of thin are would limit the amount of millions Wall Street CEO can pay themselves in exchange for creating soon to be vaporized ledger entries, which they "do not recall" how those got there upon Congressional cross examination. Finally, perhaps the most important section of all deal with what the FSB terms "Facilitation of credit creation."
Why is this section so imporant? Because recall that in a Keynesian system, credit creation = money creation = growth. Without "facile" credit creation, there is no growth period. The problem, however, is that the world is approaching its peak credit capacity across the various verticals: sovereign, financial, corporate non-financial, shadow, and of course, household. The reality is that unless some existing debt is not eliminated to make space for future "credit creation", there simply can not be growth, and the problem is that wiping out credit, means the equity tranches below it are worthless. And that is the Catch 22, because wiping out equity somewhere in the world, would have dramatic implications not only on the wealth of the 0.0001% but on credit and faith in a system, which only operates due to the inherent "credit" (hence the name) and "faith" in it. Without those, ultra-modern finance crumbles like a house of cards. In other words, while the FSB, like any other prudent regulator, is diligently warning about the dangers associated with unprecedented leverage across shadow, and all other systems, in reality what it is saying is that the only way to resolve a record debt problem is... with more debt. And so we are back to square zero, only this time we are a few trillions dollars closer to complete systemic debt saturation. * * * For more on the topic of Shadow Banking, we suggest the following reading material:
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| Billions in bearer bonds in NY vault could be lost to hurricane water damage Posted: 18 Nov 2012 03:59 PM PST By Michael Gartland http://www.nypost.com/p/news/local/manhattan/sunken_treasure_R1WidDOAwSB... It's the biggest mystery on Wall Street. Hurricane Sandy floodwaters inundated a 10,000-square-foot underground vault downtown, soaking 1.3 million bond and stock certificates -- including bearer bonds that function like cash -- and putting them in danger of turning to mush. A contractor working for the vault owner, the Depository Trust and Clearing Corp., is feverishly working to restore the paper. But the value of the threatened notes under 55 Water St. remains unknown to all but the innermost circle of Wall Street bankers. One source said $70 billion in bearer bonds were in jeopardy. ... Dispatch continues below ... 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DTCC -- a depository controlled by the biggest financial firms on Wall Street -- won't say exactly what was in its vaults, how much the notes are worth, and who owns what. Most of its member firms, including Deutsche Bank, JP Morgan Chase, Bank of America, UBS, and Citi did not return calls. The exception was Goldman Sachs, whose spokesman Michael DuVally confirmed Friday to the Post that his firm stored bearer bonds in the DTCC vaults. He acknowledged they would be nearly impossible to redeem if destroyed. Yesterday morning, DuVally elaborated, and said the value of the Goldman bonds was "less than $1 million." An hour later, he called back to say, "The market value of bearer bonds potentially impacted is less than $10,000." DTCC spokeswoman Judy Inosanto would say only that "a variety of equities and bonds" was damaged. "I can't go into details. We do not provide values for security reasons." Even a contractor who bid on the cleanup and recovery job -- the notes were drenched in diesel- and sewage-tinged water that filled 55 Water St.'s three sub-basements -- clammed up when asked about the damage. "It's nobody's business," he said. "The public doesn't need to know what's in that vault. It's between them and their customers." What is known is that for decades the vault housed millions of bearer bonds -- worth many times that amount in dollars. In 1990 two-thirds of the 32 million notes in the vault were bearer bonds, DTCC records showed. Even as bearer bonds matured and the notes were removed, the vault continued to hold 5.4 million bearer bonds at late as 2003. Experts say the only hope for saving the stacks of bonds would be to freeze-dry them in a cold vacuum chamber. As the air pressure in the chamber is reduced and heat is increased, moisture in the documents would evaporate. Security would have to oversee a tight chain of custody during the procedure, and the entire process could cost upward of $2 million. Belfor, a Texas-based recovery firm rumored to have won the job, had a trailer parked outside 55 Water St. yesterday. When asked about a contract with Goldman to recover $70 billion in bearer bonds, Belfor spokeswoman Alex Gort said, "We have very strict confidentiality." Belfor workers at the site yesterday described a "complete restoration job" under "very high security" but claimed to know nothing about the bonds. "There are three vaults," a hardhat said outside the building. "I wasn't in the vault where the bonds are. Security is very tight down there. I know they were all under water. Billions of dollars' worth, soaked. I know they are trying to pack them up." Bearer bonds are paper certificates, usually issued by governments, that are redeemable after a prescribed term. The bearer submits an attached coupon to receive payment. Because they are typically unregistered and can be used like cash, they were commonly used by those wishing to hide and not pay taxes on assets. They were banned in 1982. But those that haven't been fully redeemed remain in circulation. Andrew Kintzinger, a securities lawyer, said that if a Wall Street firm were holding bonds as a custodian for investors, there would be electronic records documenting payments that would provide investors with proof of ownership. But if Goldman or the other banks owned the damaged bonds themselves, redeeming them could be "a problem," he said. Join GATA here: Vancouver Resource Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Opinion Around the World Is Changing When Deutschebank calls gold "good money" and paper "bad money". ... http://www.gata.org/node/11765 When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ... http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan... 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| Guest Post: The Unadulterated Gold Standard Part 2 Posted: 18 Nov 2012 03:50 PM PST Authored by Keith Weiner; originally posted at The Daily Capitalist, In Part I, we looked at the period prior to and during the time of what we now call the Classical Gold Standard. It should be underscored that it worked pretty darned well. Under this standard, the United States produced more wealth at a faster pace than any other country before, or since. There were problems; such as laws to fix prices, and regulations to force banks to buy government bonds, but they were not an essential property of the gold standard. The essential was that people had a right to own and trade gold coins. They had the right to deposit them in a bank, if the bank offered attractive terms (especially the payment of interest). Banks had a right to take deposits, to buy assets, and to pay interest. Banks had a right to issue paper notes that were claims against gold. Banks had a right to lend their deposits (fractional reserves). Despite some government interference, the Classical Gold Standard enabled a Golden Age of prosperity and full employment that is totally out of reach today (not to be confused with the rapid development of technology). This is not to say there were not business failures, bank failures and panics – what were later called depressions and now recessions. A free market does not attempt to guarantee that no one can ever lose money. It is merely an environment in which no one is forced to subsidize someone else's risks or losses. Unfortunately, by the early 20th Century, the tide had shifted. Europe was inexorably moving towards war. The US was abandoning the principles on which it had been founded, and exploring a different kind of government: an unlimited government that could centrally plan and manage the economy and the lives of the people. In 1913, the US government created the Federal Reserve. Much has been written about this now-hated organization. At the time, the Fed was supposed to be the re-discounter of Real Bills. Real Bills arose spontaneously in the market centuries before banks or central banks. They are credit used for clearing. When a wholesaler delivers goods to a retailer, the retailer accepts the goods and signs the bill. Commercial terms were commonly Net 90. It turned out that in the free market, these bills would circulate as a form of currency, with a value that was based on the discount rate and the time until maturity. Real Bills were the highest quality earning asset, and the highest quality asset except only gold itself. For many reasons, politicians felt that a quasi-government agency could make better credit decisions than the market. To "discount" a Real Bill was to pay gold and take the Bill into one's portfolio. The Fed, as re-discounter, would offer the banks unlimited liquidity in exchange for their bills. Almost immediately, the Fed also began to buy US government bonds. What better way to expand credit than to push down the rate of interest? The Fed could use much more leverage than if they were restricted to buying bills (which would all mature into gold in 90 days or less!) This time, they thought, there was no limit to how far down they could push interest, nor for how long. The Fed almost certainly enabled the government to borrow at lower rates than would otherwise have prevailed, but even so the rate of interest rose during World War I. This is because the government was borrowing unprecedented amounts of money. The interest rate peaked in 1919. Then it began to fall, not bottoming until after World War II. The net effect of the Fed was to totally destabilize the rate of interest. In looking at this graph of the 10-year US Treasury bond from 1790 to 2009, one thing is obvious. There were spikes due to wars and other threats to the stability of the government. But for long periods of time, the rate of interest moved in a narrow range. For example, from 1879 until 1913 (i.e. the period of the Classical Gold Standard), the rate of interest was bound to a range of 3% to 3.5%. During World War I, the rate spiked up to 5.5% and then began to fall to well under 2% after World War II. Then the rate began its ascent to over 17% in 1981. After 1981, the rate has been falling and is currently under 1.7%. It will continue to fall, but that is a discussion for another paper. The US, unlike Europe, did not suspend redeemability of the currency into gold coin. In Europe, the toll of the war in terms of money, property, and of course lives, was much higher. The governments felt it necessary to force their citizens to deal in paper money only. After the war, they had problems returning to gold. For example, Germany was prohibited from freely trading with anyone. One consequence of this was that the Real Bills market never reemerged. In 1925, Britain initiated a short-lived experiment: the Gold Bullion Standard. The idea was that paper money would be backed by gold, but the gold would be kept in the banking system in the form of 400-ounce bars. Technically, the paper was redeemable, but the bars were so large that, for all practical purposes, the money may as well have been irredeemable to ordinary people. Britain abandoned this regime in 1931, in part due to gold flows to the US. In 1933, the President Roosevelt told American citizens that they must turn in their gold for approximately $20 per ounce. Once the government got all the gold they could, Roosevelt revalued gold at $35 per ounce. The dollar was never again to be redeemable to Americans. After World War II, Europe was physically and financially devastated. European gold had largely moved to the US either because of the coming war, or to pay for munitions. The Allied powers knew by 1944 that they would be victorious, and so met at Bretton Woods to agree on the next monetary system. They agreed to what could be called the Gold Exchange Standard. In this new standard, the US dollar would be the reserve asset of the central banks and commercial banks of the world. They would end up with dollars on both sides of their balance sheets, and pyramid credit in their local currencies on top of this reserve. The dollar would continue to be redeemable to foreign central banks (but not to US citizens). This regime was unstable, as economists such as Jacques Rueff and Robert Triffin realized. Triffin proposed that there is a dilemma for the world and the US. As the world demanded more money, this meant that the US had to run a trade deficit to provide the currency. But a chronic trade deficit would cause the value of the dollar to fall, with wealth being transferred from foreign creditors to domestic (US) consumers. Throughout the 1960's, European central banks, and most visibly France, redeemed dollars. By 1971, the gold was flowing out of the US at a rate of over 100 tons per day. President Nixon had to do something. What he did was end the Gold Exchange Standard and plunge us into the worldwide regime of irredeemable paper money. Since then, it has become obvious that without the anchor of gold, the monetary system is un-tethered, unbounded, and unhinged. Capital is being destroyed at an exponentially accelerating rate, and this can be seen by exponentially rising debt that can never be repaid, a falling interest rate, and numerous other phenomena. In Part III, we will look at the key characteristics of the Unadulterated Gold Standard.
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| Gold And Silver – Market Says Wait Posted: 18 Nov 2012 01:53 PM PST There is a reason why it has not been easy to trade gold or silver, of late. One area where information is least reliable is in the middle of a trading range. That is precisely where the price of gold is currently, on the larger monthly time frame. However, while waiting idly until clarity re-enters the picture, we can do some stage-setting in preparation for what is to come, in either direction.
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| Guest Post: Understanding the "Exorbitant Privilege" of the U.S. Dollar Posted: 18 Nov 2012 01:30 PM PST Submitted by Charles Hugh-Smith of OfTwoMinds blog, The dollar rises for the same reason gold and grain rise: scarcity and demand. Which is easier to export: manufactured goods that require shipping ore and oil halfway around the world, smelting the ore into steel and turning the oil into plastics, laboriously fabricating real products and then shipping the finished manufactured goods to the U.S. where fierce pricing competition strips away much of the premium/profit? Or electronically printing money and exchanging it for real products, steel, oil, etc.? I think we can safely say that creating money out of thin air and "exporting" that is much easier than actually mining, extracting or manufacturing real goods. This astonishing exchange of conjured money for real goods is the heart of the "exorbitant privilege" that accrues to the issuer of the global reserve currency (U.S. dollar). To understand the reserve currency, we must understand Triffin's Paradox, a topic I discussed in What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012) and Is There Any Correlation Between the U.S. Dollar and Gold (Or Anything Else?) (November 14, 2012). It seems very few grasp the implications of the Paradox, and even fewer relate it to global trade. I recently discussed Triffin's Paradox and The Rule of Law in a video program with Gordon T. Long, who noted that the U.S. Council on Foreign Relations (CFR) described the conditions in which Triffin's Paradox becomes unsustainable:
In other words, if the U.S. issues too many dollars, that could destabilize the dollar. But this is only one aspect of Triffin's Paradox: the basic idea is that when one nation's fiat currency is used as the world's reserve currency, the needs of the global trading community are different from the needs of domestic policy makers. Trading nations need dollars to lubricate trading and as foreign exchange reserves that bolster the value of their own currency and provide the asset base for the expansion of credit within their own nation. U.S. exporters want a weak dollar to spur foreign demand for their products, while foreign holders want a strong dollar that holds its value/purchasing power. This is one aspect of Triffin's Paradox that is intuitive. But it is misleading in several important ways. Consider Apple's iPhone. It is a U.S. product, right? And so it is counted as a U.S. export when it is shipped and sold in Europe. How much of the iPhone is manufactured in China? How is the "value-added" part of the product accounted for? What if Apple partially owns the foreign factories that make the parts that are in its "export"? This example shows how complex and potentially misleading it is to simplistically assume an "export" manufactured with imported parts is somehow purely a U.S. export that would be severely impacted by a strengthening dollar. If the dollar strengthens, wouldn't Apple be able to buy imported parts for lower costs? Wouldn't a stronger dollar actually lower production costs? This also ignores the fact that most large U.S. global corporations already earn 60+% of their revenues overseas, in other currencies. If the iPhone parts are made in Asia and the completed phone is sold overseas in exchange for other currencies, then exactly where does the strong dollar come in to destroy this trade? The only impact the dollar has is when overseas earnings are reported in dollars. I have often commented on this "trick": as the dollar weakened, global corporate profits skyrocketed as earnings in euros, yen, etc. rose when stated in dollars. As the dollar strengthens, overseas profits will decline when stated in dollars. But since roughly two-thirds of global Corporate America is already overseas--its factories, labor forces, back-office, etc.--and two-thirds of its revenues are earned in other currencies that are used to pay local labor and materials, then the supposedly devastating effect of a stronger dollar on corporate sales is illusory. This supposedly horrendous impact of the U.S. dollar rising also completely overlooks the premium of necessity. If you need grain and soybeans to feed your people, and the only available surplus available is American grain and soybeans that cost 25% more when priced in dollars, you will pay the premium without hesitation. If the U.S. starts exporting natural gas, buyers will happily pay a premium due to a strong dollar: U.S. gas could double in price and still be less than half the current price Europe is paying. Let's not forget that exports are 14% of the U.S. economy. The truly domestic-only part of that 14% is less than meets the eye, as so many U.S. exports (such as Boeing airliners) are assembled from globally manufactured components priced in local currencies. If the dollar strengthens, the price of all imported goods and services declines significantly. That helps 90% of the economy, for recall that imported components used in the manufacture of exports (such as oil) also decline in price as the dollar strengthens. Does it make sense to demand a policy that helps at best 10% of the economy (and even that "help" is marginal for all the reasons outlined above) while hurting 90% of the economy? No it does not. A stronger dollar will help the U.S. and foreign holders of dollars. Lastly, we need to understand the flow of U.S. dollars. Foreign nations don't end up with dollars by magic--they end up with dollars because they sold the U.S. more goods and services than they bought from us. The U.S. got the goods and the exporting nation got the dollars. The exporting nation ran a trade surplus with the U.S. and now has dollars. It can hold them as reserves, either in cash or U.S. Treasuries, or it can "recycle" the dollars back into the U.S. economy by buying real estate, investing in companies, going to Las Vegas, and so on. What happens in global recession? Trade declines along with everything else. And what happens when trade declines? Trade deficits also decline. In the case of the U.S., which exports large quantities of what the world needs (grain, soy beans, etc.) while buying mostly stuff that is falling in price in recession (oil), the trade deficit could decline significantly. (It is currently $41.5 billion a month.) And what does a declining trade deficit mean? It means fewer dollars are being exported. Think about this: the global economy is about $60 trillion, of which about 25% is the U.S. economy. Into this vast sea of trade, the U.S. "exports" about $500 billion in U.S. dollars via the trade deficit. Put in perspective, it isn't that big compared to the machine it is lubricating. (That is $250 billion less than was "exported" in 2006.) It is an astounding privilege to conjure up dollars out of thin air and exchange them for real goods. So what happens when there are fewer dollars being exported? Demand for existing dollars goes up, pushing the "price" of dollars up--basic supply and demand. It also means that there will be fewer dollars seeking a safe haven in U.S. Treasuries, which will slowly but surely exert pressure on Treasury yields to rise. Higher yields on Treasuries will then feed back positively into the value of the dollar, pushing it higher. We can now understand why global recession will actually boost the value of the U.S. dollar and push interest rates higher in the U.S., even as the stronger dollar lowers the cost of imported goods. Rather than be the catastrophe many believe, a stronger dollar will greatly benefit the U.S. and anyone holding dollars. Triffin wrote in an era of rapidly expanding trade, and so we can understand why the possibility that the interests of domestic and international holders of dollars might align, i.e. an era of declining trade where dollars will actually become scarce, was not the focus of his analysis. If we follow the above analysis carefully, we can understand why those worrying about a surplus of dollars got it wrong: the real problem going forward for exporting nations will be the scarcity of dollars. This explains the dynamics that will continue pushing the dollar higher for years to come. This is not an intuitively easy set of forces to grasp, and so many will reject it out of habit. That could prove to be a costly error.
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| Negative Real Interest Rates Continue To Drive The Gold Price Posted: 18 Nov 2012 01:27 PM PST People tend to focus on the daily “noise” and often forget the long term view. The first point that Ronald Stoeferle made during our discussion, was that the major topics of his first report (from five years ago) are still relevant. In fact, he doesn’t see any fundamental change since then. The only change he noticed is that the figures became bigger, in the first place the debt levels and the amounts of the rescue packages.
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| The week I coined GIACO/GIABO in 2009 (video)- First use on MaxKeiser.com was November 28, 2010 Posted: 18 Nov 2012 01:06 PM PST I first started using Global Insurrection Against Corporate Occupation and Global Insurrection Against Banker Occupation in 2009 Thousands of 'Silver Keisers' were sold with GIACO on the obverse in 2010
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| Posted: 18 Nov 2012 12:42 PM PST Who to believe? Some respected economic advisers are predicting not only an economic collapse, but a world war (WORLD WAR, not just the Middle East). It could certainly start in the Middle East, but if Iran, Russia, and/or China get involved, better watch out. Japan and China are, still quietly, at each other's throats. Admin likes the Fourth Turning, which usually ends in World War. Do you agree with these rich "wise men"?
Top Economic Advisers Forecast World War Kyle Bass writes: Trillions of dollars of debts will be restructured and millions of financially prudent savers will lose large percentages of their real purchasing power at exactly the wrong time in their lives. Again, the world will not end, but the social fabric of the profligate nations will be stretched and in some cases torn. Sadly, looking back through economic history, all too often war is the manifestation of simple economic entropy played to its logical conclusion. We believe that war is an inevitable consequence of the current global economic situation. Larry Edelson wrote an email to subscribers entitled "What the "Cycles of War" are saying for 2013″, which states: Since the 1980s, I've been studying the so-called "cycles of war" — the natural rhythms that predispose societies to descend into chaos, into hatred, into civil and even international war. I'm certainly not the first person to examine these very distinctive patterns in history. There have been many before me, notably, Raymond Wheeler, who published the most authoritative chronicle of war ever, covering a period of 2,600 years of data. However, there are very few people who are willing to even discuss the issue right now. And based on what I'm seeing, the implications could be absolutely huge in 2013. Former Goldman Sachs technical analyst Charles Nenner – who has made some big accurate calls, and counts major hedge funds, banks, brokerage houses, and high net worth individuals as clients – says there will be "a major war starting at the end of 2012 to 2013", which will drive the Dow to 5,000. Why are these economic gurus forecasting war? For one thing, many influential people wrongly believe that war is good for the economy. In addition, Jim Rogers says: If it turns into a trade war, it is the most momentous thing of 2011," said Rogers. "Trade wars always lead to wars. Nobody wins trade wars, except general who end up fighting the physical wars when they happen. This is very dangerous. Rogers also explains: A continuation of bailouts in Europe could ultimately spark another world war, says international investor Jim Rogers. *** "Add debt, the situation gets worse, and eventually it just collapses. Then everybody is looking for scapegoats. Politicians blame foreigners, and we're in World War II or World War whatever." And Marc Faber says that the American government will start new wars in response to the economic crisis: "The next thing the government will do to distract the attention of the people on bad economic conditions is they'll start a war somewhere." "If the global economy doesn't recover, usually people go to war." Faber also believes the U.S., China and Russia may go to war over Mideast oil.
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| Silver’s Smoking Guns, Part II: Investment Paradox Posted: 18 Nov 2012 12:35 PM PST The world of investing is ruled by a single principle: "buy low, sell high" – or at least it should be. In order to squeeze as much money as possible out of the Chumps (i.e. small retail investors); the predatory Corporate Media has turned these "investors" into momentum-chasing traders, and the principles of investing have been thrown out the window. Nowhere is this more apparent than through an examination of the silver market, and the perverse parameters of investment in this sector. In order to put the Golden Rule of buy low/sell high into action, we need to know how to determine when we are buying low – because once we have bought low, selling high is simply a matter of patience. This presumes (of course) that as an investor we have done our "due diligence" in researching companies/sectors; and identified an investment opportunity with strong (future) fundamentals. We would not have been following the Golden Rule had we bought shares in Kodak as the world was in the process of switching from camera film to digital photography. We would have been buying low and (eventually) selling lower; or in relative terms buying high and selling low. Conversely, referring back to Part I of this series; we have already ascertained that silver has large/growing demand, and it was conclusively demonstrated that silver is priced well below its fair-market value. On this basis alone, the silver sector would seem like a good destination for one's investment dollars, but we have not completed our due diligence. That still only covers demand and price parameters of this market. To get a more clear/complete picture of fundamentals we also need to focus on supply. Again referring to the first installment, we learned that silver is alone among major commercial/industrial metals in that the majority of supply is produced not via "primary mining" but as a byproduct of other metals mining. As I also explained in that previous piece, that fact alone provides a near-conclusive argument that silver is under-produced. Unequivocal empirical evidence that silver is grossly under-produced can be found merely by looking at the total collapse in inventories. As I have frequently pointed out in previous commentaries, between 1990 – 2005 alone; silver inventories plummeted by 90%. Since 2005, inventory numbers have been falsified through a transparent, record-keeping sham, presumably to cover-up even further erosion of inventories. Those who have any understanding of markets will realize that this alone is further proof of the long-term/severe under-pricing of silver, since price is the only mechanism which can restore equilibrium between supply and demand. We have a second way of demonstrating that silver is under-produced apart from the collapse in inventories. Also mentioned in the first part of this series is the fact that gold and silver exist in the Earth's crust in roughly a 17:1 ratio to each other. This suggests we should also see these metals mined in similar ratios. However, if we obtain supply numbers for silver (from the Silver Institute) and for gold (from the World Gold Council), we see that over the past decade silver has only been mined at roughly a 7:1 ratio versus gold. This would indicate that silver is currently being mined at less than half the rate it would be mined if the metal was priced at its fair-market value.
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| Europe's Depression, Japan's Disaster, And The World's Debt Prison Posted: 18 Nov 2012 11:41 AM PST Originally posted at Der Spiegel, Prison of Debt Paralyzes WestBy Cordt Schnibben In the midst of this confusing crisis, which has already lasted more than five years, former German Chancellor Helmut Schmidt addressed the question of who had "gotten almost the entire world into so much trouble." The longer the search for answers lasted, the more disconcerting the questions arising from the answers became. Is it possible that we are not experiencing a crisis, but rather a transformation of our economic system that feels like an unending crisis, and that waiting for it to end is hopeless? Is it possible that we are waiting for the world to conform to our worldview once again, but that it would be smarter to adjust our worldview to conform to the world? Is it possible that financial markets will never become servants of the markets for goods again? Is it possible that Western countries can no longer get rid of their debt, because democracies can't manage money? And is it possible that even Helmut Schmidt ought to be saying to himself: I too am responsible for getting the world into a fix? The most romantic Hollywood movie about the financial crisis isn't "Wall Street" or "Margin Call," but the 1995 film "Die Hard: With a Vengeance." In the film, an officer with the East German intelligence agency, the Stasi, steals the gold reserves of the Western world from the basement of the Federal Reserve Bank of New York and supposedly sinks them into the Hudson River. Bruce Willis hunts down the culprit and rescues the 550,000 bars of gold, which, until the early 1970s, were essentially the foundation on which confidence in all the currencies of the Western world was built. Creating Money out of Thin Air Until 1971, gold was the benchmark of the US dollar, with one ounce of pure gold corresponding to $35, and the dollar was the fixed benchmark of all Western currencies. But when the United States began to need more and more dollars for the Vietnam War, and the global economy grew so quickly that using gold as a benchmark became a constraint, countries abandoned the system of fixed exchange rates. A new phase of the global economy began, and two processes were set in motion: the liberation of the financial markets from limited money supplies, which was mostly beneficial; and the liberation of countries from limited revenues, which was mostly detrimental. This money bubble continued to inflate for four decades, as central banks were able to create money out of thin air, banks were able to provide seemingly unlimited credit, and consumers and governments were able to go into debt without restraint. This continued until the biggest credit bubble in history began to burst: first in the United States, because banks had bundled the mortgages of millions of Americans, whose only asset was a house bought on credit, into worthless securities; then around the globe, because banks had foisted these securities onto customers in many countries; and, finally, when these banks began to totter, debt-ridden countries turned private debt into public debt until they too began to totter, and could only borrow money from banks at even higher interest rates than before. At the moment, the world has only one approach to getting out of this labyrinth of debt: incurring trillions of even more debt. What does all of this have to do with Bruce Willis and Helmut Schmidt? Willis rescued the world's gold and, with it, the illusion of the good, old world. Schmidt, as Germany's finance minister in the 1970s, set the debt spiral in motion and fueled the illusion in Germany that countries could go into debt, and that this was good for everyone. When Schmidt's predecessor, Karl Schiller, resigned from the government in protest over 4 billion deutsche marks in new debt, he said: "I am not willing to support a policy that creates the impression, to outsiders, that the government pursues the motto: After us comes the deluge." Schmidt incurred 10 billion deutsche marks in new debt. Inspired by crisis economist John Maynard Keynes, the German government believed that economic stimulus programs would stimulate growth, but only under the condition that the debt was to be brought down again in better times. This economic policy was known in Germany as "global regulation." As finance minister, and later as chancellor, Schmidt took advantage of the oil crisis to drive up the government deficit with economic stimulus programs. When Schmidt stepped down in 1982, annual government spending tripled in comparison to spending in 1970, reaching the equivalent of €126 billion ($161 billion), and the public debt increased fivefold, to €313 billion. By today, the combined debt of federal, state and local governments has climbed to more than €2 trillion. A Human Debt Gene? From today's perspective -- leaving aside all the effusive rhetoric about Europe -- the introduction of the euro is nothing but the continuation of debt mania with more audacious methods. The euro countries took advantage of the favorable interest rates offered by the common currency to get into even more debt. Can all of this be blamed on some sort of human debt gene? Is it wastefulness, stupidity or an error in the system? There are two views on how the government should use its budgets to influence the economy:
When the debts of companies and private households are added to the public debt, the sum of all debt has grown at twice the rate of economic output since 1985, and it is now three times the size of the gross world product. The developed economies apparently need credit-financed demand to continue to grow, and they need consumers, companies and governments that go into debt and put off the financing of their demand until some time in the future. Of its own accord, this economic system produces the compulsion to drive up the debt of public and private households. Governments delegate power and creative force to the markets, in the hope of reaping growth and employment, thereby expanding the financial latitude of policymakers. Government budgets that were built on debt continued to create the illusion of power, until the markets exerted their power through interest. Interest spending is now the third-largest item in Germany's federal budget, and one in three German municipalities is no longer able to amortize its debt on its own steam. In the United States, the national debt has grown in the last four years from $10 trillion to more than $16 trillion, as more and more municipalities file for bankruptcy. In Greece, Spain and Italy, the bond markets now indirectly affect pensions, positions provided for in budgets and wages. A country isn't a business, even though there are politicians who like to treat their voters as if they were employees. Politics is the art of mediating between the political and economic markets, convincing parliaments and citizens that economic policy promotes their prosperity and the common good, and convincing markets and investors that nations cannot be managed in as profit-oriented a way as companies. After four years of financial crisis, this balance between democracy and the market has been destroyed. On the one hand, governments' massive intervention to rescue the banks and markets has only exacerbated the fundamental problem of legitimization that haunts governments in a democracy. The usual accusation is that the rich are protected while the poor are bled dry. Rarely has it been as roundly confirmed as during the first phase of the financial crisis, when homeowners deeply in debt lost the roof over their heads, while banks, which had gambled with their mortgages, remained in business thanks to taxpayer money. In the second phase of the crisis, after countries were forced to borrow additional trillions to stabilize the financial markets, the governments' dependency on the financial markets grew to such an extent that the conflict between the market and democracy is now being fought in the open: on the streets of Athens and Madrid, on German TV talk shows, at summit meetings and in election campaigns. The floodlights of democracy are now directed at the financial markets, which are really nothing but a silent web of billions of transactions a day. Every twitch is analyzed, feared, cheered or condemned, and the actions of politicians are judged by whether they benefit or harm the markets. The attempt by countries to bolster the faltering financial system has in fact increased their dependency on the financial markets to such an extent that their policies are now shaped by two sovereigns: the people and creditors. Creditors and investors demand debt reduction and the prospect of growth, while the people, who want work and prosperity, are noticing that their politicians are now paying more attention to creditors. The power of the street is no match for the power of interest. As a result, the financial crisis has turned into a crisis of democracy, one that can become much more existential than any financial crisis.
An Unequal Battle The one sovereign stalks the other, while the pressure of the markets contends with the pressure of the street. In Europe, in particular, this has become an unequal battle. Since Jan. 14, 2009, when Standard & Poor's downgraded Greek government bonds, the markets have determined the direction and pace of European integration. They want bigger and bigger bailout funds, they want to safeguard their claims, they want a European Central Bank that buys up government bonds indefinitely, they want slashed government budgets, they want labor market reforms like the ones in Germany, they want wage cuts such as those in Germany and, at the same time, they want these incapacitated countries mired in recession to offer the prospect of healthy growth. And this is happening in a Europe in which the sovereign nations don't truly know how much Europe they really want. The people who govern Europe don't know either, which puts them at the mercy of the markets. They have no common model for Europe, and they suspend the most basic democratic ground rules to remain capable of acting. They have to use tricks and bend agreements to prevent the euro from breaking apart. The gulf between those who govern and those who are governed, a problem in any democracy, is complicated in Europe by the mistrust between Europeans and bodies that seek to tame the crisis in their name. The actions of governments also generate mistrust. The German government, in particular, has more confidence in the markets than in the governments of Europe's crisis-ridden countries, and it finds the power of interest rates more convincing than promises of reform. Mistrust also stems from the relationship between governments and their voters, so much so that it's become common to delay important decisions until after elections and to keep them out of campaigns. There isn't much confidence in the economic judgment of the people. If lawmakers can hardly understand which bailout funds they are voting for, how many billions they are pushing in which direction, how great the risk of inflation is, what terms like target, derivative, leverage and securitization mean, how much can citizens be expected to comprehend? A citizen who hopes to understand the underlying problems of the euro crisis would, at the very least, have to read the business sections of major German newspapers like the Süddeutsche Zeitung or the Frankfurter Allgemeine Zeitung every day. Watching one talk show a week isn't enough. Even Good Debt Needs to Be Serviced The democratic decision-making process reaches its limits in this fundamental crisis, but even in the decades when debt was being accumulated, it was clear that democracies have a troubled relationship with money. There was always justification for new debt. The catchphrases included things like more jobs, better education and social equality, and the next election was always around the corner. Debt was justified at the communal level to expand bus service or build playgrounds, at the state level to hire more teachers or build bypasses and, at the federal level, to buy tanks and fund economic stimulus programs. There is good debt and bad debt, but even good debt needs to be serviced constantly. A closer look at which countries acquire and pay off debt, and to what degree, reveals unsettling correlations: The more often governments change and the more pluralistic they are, the faster the debt increases and the more difficult it becomes to pay if off. The more democracy, the looser the money. The only place money gets even looser is in dictatorships. To hold an administration responsible for the debts of its predecessors, there are debt limits in democracies. In Helmut Schmidt's day, for example, there was a provision in the German constitution stipulating that total debt could not exceed total investment. In Europe, the provisions of the Maastricht Treaty, which is aimed at ensuring the stability of the common currency, limit the amount of debt a government can accumulate to no more than 60 percent of gross domestic product. Debt Limits Have Never Worked So far, such debt limits have never worked in any country. Under new laws in Germany, the federal government, starting in 2016, will only be allowed to incur new debt amounting to 0.35 percent of GDP. The euro countries have agreed to a similar rule, but it can only take effect if all national parliaments agree. In some countries, there are already sparks of resistance against the limitation of new debt. The Italian government refuses to implement austerity measures demanded by the ECB and to approve a clause stipulating automatic spending cuts. After mass protests, the Portuguese government reversed cuts that had already been announced. Spain will fall short of an agreed deficit target of 6.3 percent, with its deficit actually predicted to come in at 7.4 percent. Euro-zone countries are in fact not allowed to incur new debt of more than 3 percent of GDP. What makes those hoping to clean up budgets in the crisis-ridden countries skeptical is the downward spiral triggered by such drastic budget cuts, structural reforms and wage reductions. Private and public demand is sinking while the economy shrinks, leading to higher unemployment, less government revenue and higher debt. In Spain, after four austerity packages, the unemployment rate has increased from 8 percent in early 2007 to 25.8 percent today, while the country's debt ratio has doubled. In Portugal, unemployment has gone up by close to 100 percent in four years, with the debt ratio increasing from 72 to 114 percent. In Greece, after budget cuts amounting to more than 10 percent of the country's total economic output, unemployment has almost tripled and the debt ratio has risen from 113 to 160 percent. These horrific numbers are not just driving people into the streets, but are also creating conflicts between politicians and economists. There it is again, the old dispute between the supporters of supply-side and Keynesian economics. Only when budgets have been balanced, taxes are low and wages are brought down can growth return, says the one side; those who cut public and private demand so radically are driving countries into recession and driving debts up instead of down, says the other. Average growth in Europe has declined continuously and was only 1.4 percent in 2011, while the economy is expected to shrink this year. For many debt-ridden countries, growth is one of four possibilities to reduce debt. Balancing budgets through cuts and tax increases is another. The third option is a debt haircut, which means declaring bankruptcy and no longer servicing at least a portion of debts. The fourth path is inflation, that is, allowing the debt to melt away on the quiet at the expense of savers and consumers. But three to four percent inflation can hardly be justified politically in Germany, although the prospects are better in the United States and other countries. For this reason, and in response to German pressure, European countries are now trying out tough austerity programs.
A European Depression and a Pending Japanese Disaster Because governments are in disagreement, bodies are taking their place that are turning into ersatz governments: the central banks. The ECB's decision to buy up unlimited amounts of the sovereign debt of European countries is a replacement for political solutions for which there are currently no majorities in the governments and parliaments of euro-zone countries. The decision by the American Federal Reserve Bank to inject hundreds of billions of dollars into the markets again to stimulate economic growth results for the inability of Democrats and Republicans to agree on a compromise between limiting debt and economic stimulus programs. Printing money -- or betting hundreds of billions once again -- is the last desperate response on both sides of the Atlantic. What began four years ago with the bursting of a credit bubble in the mortgage market is being combated with more and more new debt in the trillions, thereby inflating the next, even bigger credit bubble. The fresh trillions circle the world in the search for yield, but only a small part of the money flows into the real economy, where investments in new production plants produce lower returns. Instead, the trillions slosh back and forth, from one financial market to another, from the foreign currency market to the commodities market, and from the gold market to the stock market and back again. Because these trillions are not reaching the real economy, the risk of inflation is currently smaller than Germany's central bank, the Bundesbank, and its president would have us believe. But every saver and everyone with a life insurance policy pays for the central bank's low interest-rate policy with low interest rates. When central banks keep interest rates close to zero for long periods of time, which they have done for years, they disadvantage ordinary savers and favor major investors, gamblers and banks, which can borrow at low rates and invest the money elsewhere at a profit. Blaming the Banks Who and what has gotten the world into such trouble, and how can it extricate itself again? Not surprisingly, former Chancellor Schmidt blames investment bankers, the managers and bankers who flooded the world with worthless securities and long speculated on the sovereign debt of crisis-ridden countries, and who hedged their risks, which were much too high, with far too little capital and therefore had to be rescued with taxpayer money. Banks are still the focus of all problems in the financial markets. They still have to be supplied with money, and they still pose a threat to the system. And those who allowed them to become so powerful are all those politicians and governments that gave the financial markets so much freedom, often socialized the risks, incurred too much government debt, and allowed the municipalities, states and countries to become so irresponsible. "The market" is not some group of experts, nor is it the last resort of collective reason. It is an orgy of irrationality, arbitrariness, waste and egoism. "Democracy" is not some event involving citizens, or some celebration of altruism and far-sightedness, but rather the attempt to bundle diverging interests into decisions in a way that's as peaceful as possible. Together, the market and democracy are what we like to call "the system." The system has driven and enticed bankers and politicians to get the world into trouble, or least one could argue that if they too weren't part of the system. And we could sweep it away if we had a better one. Instead, we are left with an undisguised view of the system. One of the side effects of the crisis is that all ideological shells have been incinerated. Truths about the rationality of markets and the symbiosis of market and democracy have gone up in flames. The Problems of Modern Capitalism The European depression is only prelude, with the Japanese disaster waiting in the wings. The country's debt-to-GDP ratio is 230 percent, and the government is dependent on the opposition approving the issue of new government bonds. Lurking behind it all is the American abyss, the debt drama of the next few months, the showdown and duel between Democrats and Republicans over which party can blame the other one for a national bankruptcy. And then, finally, we have a clear view of the three biggest problems in finance-driven, democratically constituted capitalism:
It is always only at first glance that the world is stuck in a debt crisis, a financial crisis and a euro crisis. In fact, it is in the midst of a massive transformation process, a deep-seated change to our critical and debt-ridden system, which is suited to making us poor and destroying our prosperity, social security and democracy, and in the midst of an upheaval taking place behind the backs of those in charge. A great bet is underway, a poker game with stakes in the trillions, between those who are buying time with central bank money and believe that they can continue as before, and the others, who are afraid of the biggest credit bubble in history and are searching for ways out of capitalism based on borrowed money. Translated from the German by Christopher Sultan
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| Join GATA in January in the city with the best reputation in the world: Vancouver Posted: 18 Nov 2012 10:36 AM PST 12:33p ET Sunday, November 18, 2012 Dear Friend of GATA and Gold: Cambridge House's Vancouver Resource Investment Conference, to be held Sunday and Monday, January 20 and 21, will be full of speakers who are GATA favorites, including Al Korelin of the Korelin Economic Report, Peter Grandich of the Grandich Letter, David Morgan of Silver-Investor.com, Thom Calandra of the Calandra Report, David Franklin of Sprott Asset Management, Frank Holmes of U.S. Global Investors, financial letter writer Jay Taylor, GoldSeek.com proprietor Peter Spina, and financial letter writer Ron Hera. Also speaking will be GATA Chairman Bill Murphy, GATA Board of Directors member Ed Steer, and your secretary-treasurer. Of course hundreds of resource companies will be exhibiting as well and conference attendees will be able to talk with their executives. Admission is free for those who register in advance, C$20 for others. The conference will be held at the new Vancouver Convention Centre West and the conference has arranged special rates for attendees at the beautiful adjacent hotels, the Pan Pacific and Fairmont Waterfront. GATA hopes to hold an informal fundraising cocktail party during the conference. More about that later as plans are confirmed. For those who haven't already fallen in love with Vancouver and British Columbia, the city is about the mildest place in Canada and January there is usually only cool and damp, with the weather failing to detract from the natural beauty of the mountains and waterways. Indeed, just a few weeks ago the Reputation Institute in Denmark voted Vancouver the city with the best reputation in the world: http://ca.news.yahoo.com/blogs/dailybrew/vancouver-voted-city-world-best... Of course Vancouver is also the business center of the world's mining industry, so it's really the place to be for those interested in natural resources. Complete information about the conference, including registration, is at the Cambridge House Internet site here: http://cambridgehouse.com/event/vancouver-resource-investment-conference... We hope to see many friends in Vancouver in January. CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Opinion Around the World Is Changing When Deutschebank calls gold "good money" and paper "bad money". ... http://www.gata.org/node/11765 When the president of the German central bank, the Bundesbank, pays tribute to gold as "a timeless classic". ... http://www.forbes.com/sites/ralphbenko/2012/09/24/signs-of-the-gold-stan... When a leading member of the policy committee of the People's Bank of China calls the gold standard "an excellent monetary system". ... http://www.forbes.com/sites/ralphbenko/2012/10/01/signs-of-the-gold-stan... When a CNN reporter writes in The China Post that the "gold commission" plank in the 2012 Republican platform will "reverberate around the world". ... http://www.thegoldstandardnow.org/key-blogs/1563-china-post-the-gop-gold... When the Subcommittee on Domestic Monetary Policy of the U.S. House of Representatives twice called on economist, historian, and gold standard advocate Lewis E. Lehrman to testify. ... World opinion is changing in favor of gold. How can you learn why and what it will mean to you? Read the newly updated and expanded edition of Lehrman's book, "The True Gold Standard." Financial journalist James Grant says of "The True Gold Standard": "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman she has finally found him." To buy a copy of "The True Gold Standard," please visit: http://www.thegoldstandardnow.com/publications/the-true-gold-standard Join GATA here: Vancouver Resource Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Fred Goldstein and Tim Murphy open All Pro Gold Longtime GATA supporters Fred Goldstein and Tim Murphy have brought their many years of experience in the precious metals and numismatic coins to All Pro Gold as metals brokers who specialize in the delivery of gold and silver bullion bars and coins as well as numismatic gold and silver coins. Fred and Tim follow these markets closely and are assisted by a team of consultants in monitoring market trends. All Pro Gold offers GATA supporters competitive pricing on all bullion products and welcomes inquiries. Tim can be reached at 602-299-2585 and Tim@allprogold.com, Fred at 602-799-8378 and Fred@allprogold.com. Ask about their ratio strategy and the relationship of generic $20 dollar gold pieces to 1-ounce gold bullion coins. Visit their Internet site at http://www.allprogold.com/.
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| Bruce Pile: Basel III and gold Posted: 18 Nov 2012 10:10 AM PST 12:09a ET Sunday, November 18, 2012 Dear Friend of GATA and Gold: Market analyst and fund manager Bruce Pile argues today that the Basel Committee on Banking Supervision, a division of the Bank for International Settlements, is, with its "Basel III" banking rules, gradually returning gold to its role as international money and that this will increase demand for gold among banks everywhere. Pile seems to have been following GATA's work, what with his reference to the report written about the BIS by Edward Jay Epstein in Harper's magazine in 1983 and often cited by GATA: http://www.gata.org/search/node/Edward+Jay+Epstein Pile's commentary is headlined "Basel III and Gold" and it's posted at Seeking Alpha here: http://seekingalpha.com/article/1016161-basel-iii-and-gold CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy Platinum Intercepts Best Pt+Pd+Au Grades Yet Company Press Release VANCOUVER, British Columbia -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) announces more results of its 2012 drill program on the company's fully-owned Wellgreen platinum group metals, nickel, and copper project in southwestern Yukon Territory, Canada. Four surface holes and four underground holes all intercepted significant mineralized widths, ranging from 28.5 meters (WS12-201) and up to 459.5 metres (WS12-193). Highlights include WU12-540, which returned 8.9 metres of 5.36 grams per tonne platinum, palladium, and gold; 1.73 percent copper; and 1.01 percent nickel within 304.5 meters of 0.66 g/t platinum-palladium-gold, 0.20 percent copper, and 0.27 percent nickel. The surface drill program started in June and has completed 16 holes (assays pending for 12 holes) with two rigs now on site. The surface program continues to progress at a steady pace. Prophecy Chairman John Lee commented: "Wellgreen is a very large nickel, copper, and platinum group metals project with near-surface high-grade zones. High-grade intercepts will be incorporated into resource modeling and mine planning in the pre-feasibility study. We expect further positive drill results from Wellgreen shortly." Wellgreen features a low 2.59-to-1 strip ratio, is situated at an altitude of 1,300 meters, and is only 15 kilometers from the two-lane paved Alaska Highway. Those factors significantly minimize the project's indirect costs. For the complete company statement with full tabulation of the drilling results, please visit: http://prophecyplat.com/news_2012_sep11_prophecy_platinum_drill_results.... Join GATA here: Vancouver Resource Investment Conference * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT GoldMoney adds Toronto vaulting option In addition to its precious metals storage facilities in Hong Kong, Switzerland, and the United Kingdom, GoldMoney customers now can store their gold and silver in a high-security vault operated by Brink's in Toronto, Ontario, Canada. GoldMoney also has recently partnered with Rhenus Freight Logistics to offer another gold storage option in Switzerland. The Rhenus vault is in the secured zone of Zurich Airport and offers customers superb security as well as the ability to inspect their gold. Storage at the new vaults in Canada and Switzerland is available at GoldMoney's lowest fees. Customers can select their storage location when placing their buy order. GoldMoney customers can take delivery of any number of gold, silver, platinum, and palladium bars from any GoldMoney vault, as well as personally collect their bars stored in the Hong Kong, Switzerland, and U.K. vaults. It's easy to open an account, add funds, and liquidate your investment. For more information, visit: http://www.goldmoney.com/?gmrefcode=gata
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| Money is far too important to be left to the politicians Posted: 18 Nov 2012 08:18 AM PST When I first joined The Real Asset Company I attended a discussion on the oncoming collapse of the paper money system, held in a small room at the Houses of Parliament. It was in this historical place where a (now) good friend of mine said something which has stuck with me ever since, 'I don't know which money is the right money, but whichever the people choose must be the right one.' I couldn't agree more, but, as we all know, governments do not.
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| Tuesday 20th November 7.30pm… Yes, it's open to the public Posted: 18 Nov 2012 08:10 AM PST THE COMING CURRENCY COLLAPSE? a talk presented by Max Keiser hosted by George Galloway MP Grand Committee Room Westminster Hall, Houses of Parliament Tuesday 20th November 7.30pm Are western economies about to be plunged into further financial meltdown through the … Continue reading
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| Posted: 18 Nov 2012 07:57 AM PST Gold is heading to $3,500 and possibly as high as $12,400 an ounce predicts 'Mr. Gold' Jim Sinclair the legendary gold trader who advised the Hunt Brothers in the late 1970s and probably made more money than anybody else of of the 1970's gold boom.
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| THE FORCES THAT WILL PUSH SILVER OVER $100 Posted: 18 Nov 2012 07:53 AM PST By SRSrocco There are tremendous forces at work that will push silver over $100 an ounce. According to the 2012 World Silver Survey, total global silver investment demand has risen from only 31.6 million oz in 2002 to a staggering … Continue reading
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| Understanding Asian gold demand Posted: 18 Nov 2012 07:00 AM PST There is growing awareness that gold is accumulating in Asia. Indians have for a long time been the largest buyers of gold and have a tradition of giving gold as gifts at auspicious times. This gold ...
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| The Mysteries of Finance: What Do Canadians Know that Americans Don't? Posted: 18 Nov 2012 04:23 AM PST  It is my first visit north of the border in more than a decade and it is abundantly clear that the Canadian economy has been outperforming. The markets concur. Canada's success is notably symbolized by, for instance, the Canadian dollar — the "loonie" — which is up more than 55 percent against the U.S. dollar in the last ten years. It is chastening to note that just since the beginning of the Wall Street crisis in late 2008 alone it has gained more than 25 percent. So what do the Canadians know that Americans don't? One thing surely is that you can't have a healthy economy if you have a sick financial system. The fact is that the Canadian banking system has not suffered a serious crisis since the 1930s. Compare that to the pattern of rapidly recurring crises that have rocked the U.S. banking system since the 1980s. So how do the Canadians do it? They believe unashamedly in firm regulation and, unlike most of the rest of the English-speaking world (perhaps their Francophone minority had something to do with this), they have generally refused to follow America's lead in financial faddishness. Read more.... 
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Can you hear that sound? It is the sound of the air being let out of the economy. Since the election, there has been a massive tsunami of layoffs and business failures. Of course the company that is making the biggest headlines right now is Hostess. On Monday, Hostess will be in a New York bankruptcy courtroom as it begins the process of liquidating itself. Needless to say, Twinkie lovers all over America are horrified. Many are running out to grocery stores and hoarding as many as they can find, and some online sellers are already listing boxes of 10 Twinkies for as much as 
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